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Business Valuations

The most important aspect of selling a business is the Business Valuation. As a seller you want to get the maximum value for your business and have confidence in the price your business is on the market for and the price that you accept. No one wants to leave money on the table. Likewise, an inflated value, while flattering, will only result in the business sitting on the market with few, if any inquiries, and a great deal of time wasted.

We offer a free Market Value Analysis to prospective business owners who are considering selling their business. We also offer a range of independent third party valuations for instances where a more comprehensive or independent valuation is required.

Market Value Analysis

Our Market Value Analysis (also called a Calculation of Value) uses comparable sales from nationwide databases to calculate the market value of your business. This is based on the sales and Discretionary Earnings of the business. To be clear, Discretionary Earnings are NOT the net profit shown on your tax returns. Discretionary Earnings are the total economic benefit of owning your business which includes all of your personal expenses and perks that are run through the business. See What are Discretionary Earnings for a more detailed explanation of how we calculate this.

Independent Third Party Valuations

When do you need a Third Party Valuation?

5 Reasons to get a Third Party Valuation for Your Business

Selling Your Business: The less comprehensive Market Value Analysis is sufficient for many transactions, however, when the business value exceeds $1,000,000 a Third Party Valuation is a good investment. We have found that Third Party Valuations give buyers confidence in the asking price for the business and of equal importance they are a valuable tool in defending the price-value of the company during negotiations.

SBA Financing: SBA loans require a Third Party Business Valuation or Appraisal as part of the underwriting and approval process. The Third Party Valuation is ordered by the bank through one of their approved valuation firms.

Buyout of a Partner: Agreeing on an accurate and fair market value for the company when buying out a partner is difficult even in a congenial buyout. An Independent Third Party Business Valuation eliminates the emotion and personal opinions from the negotiations with a fact based appraisal of the business value.

Divorce or Litigation: The business value is often a key element in divorce and litigation proceedings and a Third Party Valuation is often required

Estate Planning: Business valuations are often required for estate planning in order to establish an accurate value of the business and owner’s assets.

Types of Independent Third Party Business Valuations (appraisals)

Value Analysis or Calculation of Value: The Value Analysis is the most basic Third Party Valuation. It is used to provide an independent valuation of small businesses to provide the owner with an asking price for prospective sale. It is also used for estate planning and business planning.

Formal Valuations:The Formal Valuation or Complete Appraisal is used for businesses with sales between $1 million and $5 million to determine the asking price in a prospective sale and also for SBA financing where a formal Third Party Valuation is required. It is also used for estate planning and in some cases litigation support.There are three types of Formal Valuations:1) Formal Valuation Limited Scope2) Complete Appraisal Summary Report3) Complete Appraisal Self Contained Report.The Formal Valuation Limited Scope is the least expensive and used to determine an independent market value for prospective sale. Complete Appraisal – Summary Report is more comprehensive than the Limited Scope Valuation and used for determining the market value of larger businesses, SBA financing, and simple estate matters. The Complete Appraisal Self Contained Report is the most comprehensive valuation and used for large transactions, litigation support, and ESOP (Employee Stock Ownership Plan) valuations.

M&A Valuation:M&A valuations are used for businesses with sales over $5 million. For these valuations the more comprehensive Complete Appraisal Summary or Self Contained Report may be used depending upon the transaction and complexity.